Volkswagen dealership delayed

Hanlees Automotive’s plans to open a Volkswagen dealership in Davis are delayed because the owners hit structural complications while proceeding with construction.

The owners had planned to remodel an existing building for a showroom at the former Ford Motor Co. dealership on Chiles Road, but it now seems starting from scratch with new construction might make more sense, Community Development Administrator Katherine Hess said.

Construction was expected to start this spring, with occupancy in October, Hess said.

Despite the delay, there is no intention to abandon the project, owner Don K. Lee said Tuesday. Lee’s business partners are Dong I. Lee and Kyong S. Hong.

Lee said the owners have not yet decided how to address the engineering issues, but will have a better idea in a couple weeks.

The Davis City Council last August approved a $1 million loan to Hanlees from redevelopment funds to help the company offset what was at the time an estimated $2 million project.

If Hanlees decides to build new or almost new, rather than remodel, construction costs may be higher, but the owners do not expect more financial assistance from the city, Lee said.

“We’re not going back to the city for additional money at this time,” Lee said.

But the City Council will need to approve an amended loan agreement, which will reflect necessary changes, including the time frame, Hess said. The amended contract likely will be ready for council review in June, she said.

Planning changes can be reviewed and approved at the staff level, she said.

The council approved the loan because car sales are a reliable local revenue stream. The Volkswagen dealership is expected to create 30 new jobs and generate $235,000 in annual sales tax revenues for the city’s general fund.

Under the approved contract, the loan will be forgiven if the dealership generates enough revenue for the city. The repayment amount is $133,314 annually, but sales tax revenues of more than $174,007 a year will lower repayments to $59,307.

The debt is forgiven when sales tax receipts total more than $244,234 a year.